Itaconix (LSE:ITX) — Preliminary results for the year ended 31 December 2023

0:00 Good afternoon, and welcome to the ITACONIX PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to John Shaw, CEO. Good afternoon, sir.

0:32 Good afternoon. We look forward to presenting our 2023 full year results to you. I'll I'll present an overview, then our CFO, Laura Denner, set the financial results, and I'll come back to talk about our strategic progress. In terms of the headlines, we had record revenues in 2023, in line with expectations, 7,900,000 in revenue, 40.5% revenue growth over 2023. Equally important, we increased our gross profit margins to 31%, an important milestone for us, and we had our adjusted EBITDA loss down below a million dollars.

1:20 On the developing the our future, and continued investment in our future, we did complete a $12,700,000 fundraise, in early twenty twenty three. We are using those proceeds for selective increases in our headcount to support commercial growth, but more importantly, using it, for new revenue opportunities, for our next chapter of growth.

1:48 A key metric for us is what our revenues are per household. We want to bring, safer, better performing products, into every into everyday use of consumer products. A key metric for us is what our revenue is per thousand households. We've grown from a relatively small level, to actually reading reaching $49 per thousand, households in North America, and overall across Europe and North America, $22 per thousand households. North America has been a key for us because that's a metric in terms of what the potential is, for our ingredients and a leading indicator for us. Our goal is to expand, expand that reach, into Europe and to raise, our revenue per household across Europe and North America.

2:39 We've achieved some important milestones in terms of bringing safer ingredients to consumer products, based on performance and cost, with the addition of additional advantages of sustainability. First of all, in cleaning, we're really in takeoff stage. We've established, the use of our of our ingredients across a broad range of cleaning products, in particular, our ITACONIX TSI three twenty two, which is used for generating shine, particularly in automatic dish detergents, has expanded its use from North America and into Europe, a very important milestone for us in 2023 and will continue in 2024.

3:25 We are continuing to expand our sustainability credentials, for our products, as demands, from consumers, regulators, and brands increase around the sustainability of all the ingredients, including the life cycle analysis of what the carbon footprint and the environmental fate of the products when they go out into the environment post use. We continue to work on improving those credentials. And as I said before, we're increasing our gross profit margins really across all of our areas. It was important milestones for us in beauty and hygiene, after a bit of a post pandemic lull in activity, that in 2023, we did restore revenue growth in that area where volumes and activity kind of recovered from that in both areas for it.

4:23 In terms of, technology side, we're continuing development of new hair care, ingredients. We do have our VELASOP BR 300 that's continuing under development. We had hoped to launch it last year, and we are continuing to work on the stability of the product in end product formulations. So we did not fully achieve our goal that year as something we hope to do this year. And then we do have a new dry form of our zinc polyideconic for odor control for non liquid formulations. We have that now available in in inventory, and we'll start the sales and marketing of it this year.

5:05 In terms of large potential, what we have for safer ingredients for performance and cost across our areas, We had 7,200,000 in revenue, in cleaning, 400,000 in hygiene, and 300,000 in beauty. These are still very small numbers relative to the market potential of the addressable market that we see in each one of our areas. In cleaning, our lead product is ITACONIX TSI three twenty two, used in automatic dish detergents to manage water hardness and create shine and manage calcium on it. In the, odor neutralization, we have two lead products. One is ZYNIDOR, which is sold, through Croda in various forms, And then we have our own version, z p 30 and z p 20, in liquid form and Bella Fresh, z p seventy five and ninety five, which are the solid forms.

6:02 In beauty, we sell, Amaze SP through Neurion for hairstyling. We also have our own version of VeloSoft any 100. And then in for foam enhancement to give nice creamy foam, we have VeloSoft SF five zero five. These are all great products for bringing safer ingredients for performance and cost, and we have minor penetration so far into what are very large addressable markets where we think there's great potential, for us to be a much larger, company.

6:39 I'll turn it over, to Laura Denner, our CFO, for the financial review.

6:49 Thank you, John. As John had already indicated, we had an amazing financial and commercial year. We did improve on all of our financial KPIs this year. We improved our revenue volumes by 41% from last year. We also improved our gross profit margin. We improved our group EBITDA loss, so we reduced our EBITDA loss as well as the company is put in a good financial position for cash. So as we dig into kind of the revenue growth, revenue growth was really driven by our current existing customers. So we saw revenue growth of 1,800,000 from those existing accounts, which represent about 78% of the overall growth.

7:36 Another key indicator of our future growth is our new accounts that we brought on. So we had more than 10 new accounts this year that came on, only representing about 500,000 in revenues for this current period. But we anticipate that these will continue to grow in the future as they'll get a full year next year of revenue volumes and then continue to proliferate into their end markets. One thing we did wanna kinda go over is our revenue concentration. We do have two key customers that represent about 63% of our overall revenues. When we look at our customers, we really look at the contract manufacturing sites that we deliver to. So sometimes we will work with a merchandiser or a retailer to generate a formulation. That retailer then goes to a contract manufacturer.

8:28 We sell to that contract manufacturer. So contract manufacturers can do various products for many different customers. So one contract manufacturer can do multiple products that we have formulated into. Customer three and four, which, to highlight them, were new in 2022, had substantial growth in 2023. They had about 300 to $400,000 in revenue growth for ITACONIX. They're well positioned to continue growing in their respective markets as well. So we're we're very excited about a lot of our customer growth going forward.

9:11 So continuing moving down the income statement. The gross profit margin, we moved from 26.6% to 31%. A lot of this is attributed to the improvement in cost of sales. So we had better plant utilization. We were putting more product through the plant as well as we did see kind of raw materials come back down. So ocean freight kind of came back back to a new norm, of that pre pandemic pricing. So we did see some relief on just logistics costs for our raw materials. Two other key areas were the sales mix. As John indicated, we grew across all three end markets, so from cleaning, beauty, and hygiene.

9:57 Our beauty and hygiene have very good gross profit margins, so they did help kind of contribute to the improvement in our overall gross profit margin. Lastly, we didn't do a lot of pricing adjustments for our customers this year, but we had one pricing adjustment at the beginning of this year that did attribute to some strong gross profit.

10:25 So as we move down to the very bottom where we talk about EBITDA, one of our key goals is to continue to make it to breakeven EBITDA. Part of what has been the improvement in our EBITDA was just that improvement in our gross profit. So we brought down an additional million dollars to our EBITDA line this year. We did continue to invest in the growth of the company from increased headcount, applications testing, polymer testing, improving our commercial team. So across all areas, that did represent some additional spending to continue on the growth path that we're moving on.

11:10 And then our last KPI is cash and investments. Big thanks to our existing shareholders as well as some new shareholders that came onto our registry in 2023. We had a very successful fundraise. In February 2023, we brought in gross proceeds of 12,700,000.

11:28 We did utilize some of this to just grow the business, so that did impact our EBITDA loss. We did infuse some of the working capital so that we're well positioned with inventories in the right location to meet all of our customer needs. Lastly, we did have some CapEx investment that was primarily in the lab so that we can develop new applications and new formic and new work, new polymer work that we're doing. So a lot of great growth, but in a really good cash position at the end of the year. So just to kind of dig into some of the revenues by market, cleaning is kind of our flagship. It continues to drive the business. We saw a lot of growth in our cleaning side of the business, about 42%.

12:17 We did bring a substantial improvement to our gross profit margins. We brought them up to about 28%. So good progress there. We're gonna continue to see this gross profit margin improve as our polymer sales continue to increase. Beauty and hygiene as well had good traction. Beauty nearly doubled this year. Again, as we get out of the pandemic, more formulation work is being done. We're seeing that now translate into revenue growth. Beauty and hygiene, although representing a small portion of our overall revenues, have a huge impact on our gross profit as their gross profit margins are in the upwards of 60%. What that translated to was an overall gross profit margin for for the company of 31%, so bringing us down our target targeted gross profit margin for the company of 35%.

13:10 So we're on that path to continue to improve gross profit margin. And then as we kind of look for revenues by segment, performance ingredients are polymers that we generate here. They are those TSI, the Vel Velafresh, the Zynadors that we sell into the market that can help provide key claims. We did see revenue growth in our polymer sales by about 27%. We saw a a good improvement in our gross profit margin. So in that segment, we had about 38% gross profit margin in our polymer sales of the business. Formulation solutions is a service that we offer to some of our cleaning customers so that they can generate a fully formulated product.

13:55 So these are support ingredients that are identified when we do the formulating work. We help provide those into the pod manufacturing. That grew as well as the overall pod market grew as well as the overall cleaning market grew. They do represent a small portion of gross profit. They only contribute about 9% gross profit margin, but they do help us to provide those key claims that our customers are looking for of certain performance, shine, and clean. So I'll turn it back over to John to kind of walk you through what our next stages are. Thanks. I'll go through some key aspects of our strategic prod progress both in twenty twenty twenty four and what we achieved in 2023.

14:47 As I've described in the past, we are in a new era of development. We started the company in 2008. After many years of work was done, make trying to make polymers of itaconic acid, we established the use of polymers of itaconic acid as ingredients. And really by 2018, is when we really were able to position a number of ingredients, for key values and formulations. We are now, well into that phase, and with the funding that we have, are going to continue to advance a broad range of applications into a customer base of recurring revenues. The key aspect that we focus on is idaconic acid as a starting material.

15:36 Again, we purchase idaconic acid on the open market. We run it through our production process here to create a polymer. And what we do from the functionality of our polymers compete against a lot of acrylic acid polymers, primarily and also some styrene polymers. A key aspect of itaconic acid is its safety profile and its feedstock base. Iconic acid is produced by the fermentation, using a some form of sugar. Right now, it's, corn sugars, where it's fermented. A organism, eats the sugar and spits out aduconic acid. Right now, all of the plants, production facilities for that are in China, and we import it here into our facility and run it through our proprietary process.

16:25 It has aduconic acid is a natural metabolite that's actually produced in our bodies. It's produced in the plant world. It has an excellent safety profile. It also has excellent functionality, to have, relative to the acrylic acid where in certain applications, we have unique functional advantages to be able to to bring to bear in certain applications. There's a wide range of potential applications from water industrial water solutions, food and agriculture, paints and coatings, composites, hygiene, very broad area, which we, the kind of a $20,000,000,000 sandbox that we get to operate in. To date, we have identified, with specific products that we brought forward, $2,300,000,000 in addressable market.

17:13 Our targets, for 2024, are to increase the our our volumes from existing, European cleaning accounts. As Laura said that, some of these just came on in 2023, and we tend to see a we expect to see a steady progression with new accounts where they might have started the middle middle of the year, earlier in the year, relatively low volumes, and then they start increasing the use of of of our polymer progressively over a number of years. We expect to increase, the volumes from existing cleaning accounts where we're seeing some, excellent success. We also expect to bring on some new accounts in the cleaning area in both Europe and North America and to increase our revenues from noncleaning applications.

18:04 These are important milestones for us. We also do wanna increase our gross continue to increase our gross profit margins. We wanna get more sales from some smaller accounts, increase our revenues from noncleaning applications where, as you can see from Laura's data, our gross profit margins are higher in noncleaning applications. We are also updating prices to our larger accounts to make sure we maintain our gross profit, per pound. So even though some of the prices may come down because our material costs have come down, we still wanna keep that absolute dollar per pound gross profit the same. And we also wanna increase our production throughput to get our overhead rates per pound down. And we think we can achieve all of the all three of these.

18:50 And lastly is to diversify our revenue base. We'll are we're a new purpose driven North American cleaning brands that have the need for our formulation expertise that we can bring to them, a number of new European cleaning accounts, and some, importantly, some non cleaning accounts and applications. One of the areas we've discussed in the past, is in the sustainable fashion area, which is for us is in leather. We expect that to be a very attractive area for us and a growing area for us. And we actually have had our first pair of shoes made with leather that's been used where polyiodiconic acid, our polymer, has been used in the retaining process to produce the leather and actually get into shoe production with with these.

19:41 Very exciting progress for us. So we think these are important targets for us. I do wanna come back and specifically address, the situation that we've run into in the first quarter here, regarding a large merchandiser that we work with in our adjustments and our revenue expectations for 2024.

20:03 Take a step back and just take a look at what the composition of a dishwasher detergent, the costs are the the ingredient cost level, and I've indexed it to to a 100 for a North American premium formula. If you look at the two green starting from the bottom, the two green colors are the shine, what creates a nice shiny glass for you, that where you need to manage, the the calcium and the water hardness so it does not leave a deposit, on your glasses. The second portion up in the lighter blue, is, cleaning. That's to make sure that the pasta and the mince meat and, all all the the soils on your plates get removed.

20:51 And the top darker blue part is the aesthetics, fragrance, any colors that might be in it, so anything to kinda catch the eye in the, in in the sensory aspect of it. As you'll note is that when you go from an economy formula to a premium formula, actually, the shine part of it, that we contribute to is doesn't increase that much, actually. The big difference between an economy formula and a clean and a premium formula, will be the amount of cleaning that it does. Within the shine portion, we're about 50%. Our our polymer would be about 50% of the cost of the shine aspect of it. So that tends to be maybe, you know, half a cent, 0.6¢,

21:38 0.7, 0.8¢ per pod in it. And then there are other ingredients that go into making creating the shine. So as the on an overall aspect, although our polymer is an expensive portion of it and maybe one of the single most expensive ingredients in it, in the overall formulation in terms of achieving the desired performance and cost for a for a formula were relatively small portion of it. And even further to take a look at what that formulate the the ingredient cost is relative to what you'll see in the price out in the, in the market, the the the total ingredients cost that I just talked about, can is usually less than half half of the total production cost of an automatic dish detergent pod in North America.

22:37 And then you'll see that those pods so they'll sell that the cost may be anywhere from point seven to maybe 10, just under 10¢ per pod. And then these pods will then go out into the market and sell from anywhere from 12 to 35¢ per pod. So, again, the portion that we're that we're contrib we we are putting a very important value into the overall performance of the of the formulation. But in terms of the overall impact of the cost of the formulation and relative to the retail price, it's relatively minor. The situation that we got into with a leading merchandiser is that if I look back at the we've done the full formulations.

23:22 There've been a lot of cost pressure on the overall ingredient cost, and the situation came into what did we deserve and what where are the cost issues and what did we deserve for our the value of our ingredient. And it's these are ongoing discussions, but the the, merchandiser has concerns about the overall cost of their of their formula. And then we have terms that we need to get for the value of our ingredient in for that small portion of it. So it's a dynamic situation. These these have been ongoing discussions, but it's important for us going forward as a company to make sure that we capture the value for our ingredient and not start absorbing the cost of any issue with the overall cost of the formula by decreasing the cost of our polymer.

24:16 It's just a very difficult cycle to get into. One of the key one of the key values that we had with raising, with the money that we raised last year is that it actually gave us the freedom to make sure that we, could go out and make sure that we get the value for our ingredient within this this aspect. We know we we've done the full formulations. We know what the value is. We believe we do have a low cost formulation on it, and and we believe that if we can present our polymer that way and maybe extract ourselves out of some of the rest of the overall formulation cost, that'll be helpful. That being said, I can assure you that every customer that we have out there has alternative formulations, that, may or may not include, our material in it. That's just the the competitive nature of it. There are many formulations out there that do not use our polymer.

25:13 The the brand leaders, the global brand leaders of both Procter and Gamble and for Rec and Benkeys that we finished, do not use our polymer, and they have very effective products out there. But we also know that there is a segment of the market where we can deliver that value, and it's very important for us going forward that we capture that value to for what we bring to the formula on it. So that's this that's what got us to the point, a few weeks ago, where the the negotiations that got to the point where we did not believe we were come to reconcile it, and the decision was made by the board that with Laura and I certainly in agreement in it that it's something we needed to announce this to the market. It was a significant potential change in our business conditions, and, that's the transparency that we need to have, that we want to have and do have and will have with the market in terms of what our immediate business condition is. So that's why we took that action a couple a few weeks ago. We were not we were not convinced of that back in, February in our previous trading update, but it did come to the point where we believe that that was, required for us to do. We do look we do know in the midst of that, though, that we have very high value, in delivering low cost, high performing, shine in into automatic dish formulations.

26:44 We are finding that, in Europe. We are finding that with new customers in North America. And I think that as we go forward, being the cash position that we have will allow us to negotiate better terms and diversify our customer base to build a large company. In terms of our outlook, our current market expectations are six to six and a half million dollars, for revenues. This is what we've, put out to what we put in our r and s. We still, stand by that. We have, current market expectations for, adjusted EBITDA of $1,600,000 loss of EBITDA. So we've actually with that loss, we've moved added a year to it.

27:35 We that's where we are now. We hope to do much better than that during the year. Most importantly, though, is setting up for a profitable years ahead is be able to improve our profit margins and our mix of customers and applications to have that diversified customer base and application base at high margins and grow from there. It's important to take that action now while we have the freedom to do that so that as we go forward, we can build the type of company that we want to to be a $100,000,000 company with a broad range of diversified customers and applications. From an investment standpoint, we've already made important investments in lab upgrades. You'll be seeing developments coming out of our work in the lab in the coming year.

28:25 And we will some of those will eventually make it out into some improvements in our production process where we expect to spend some money. We are not planning on we we plan to continue production here in North America at this facility. We have plenty of capacity available here, and we have some production improvements we could do to expand our product offerings from this site. We do not see a need for a new plant elsewhere at this time. We have done some selective increases in our operating expenses. We've added some staff. We were running extremely lean, at the end of, 2022. We needed to, add, build up our backbench of support. We've selectively done that with some headcount on it to support our commercial development and operational growth.

29:17 But we think we're pretty we've have some hiring done. We have some replacements to to to do, to to fill in, some positions where people have rotated out. And, but overall, it's something that we expect a they'd be a very manageable amount on operating expenses, particularly relative to what actually, develops on the revenue side.

29:46 So we continue to bring a, performance cost and sustainability to the marketplace. We do have an established customer base that's going through a bit of a adjustment right now. We think that's a healthy adjustment, to make sure that we have, value for our polymer, within our revenue base on it. We have a 16 patent family of proprietary technologies to build off of, relatively low level directs direct competition. We don't believe anyone is producing, no one is producing our polymers. We do, in each application area, compete against specific formulations on it. But in terms of direct competition, low level, continue to have relatively low capital requirements and have high quality recurring revenues that we wanna make sure they maintain their high quality by make by having a high level of profitability within those revenues.

30:48 So we're excited about our our position. It was a difficult decision that we made in the beginning of of this year, but we're excited about where we could build off from it. Go back up.

31:15 And that's our presentation for for today. We're look forward to answering your questions. John, Laura, thank you very much for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the tab situated on the right hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via investor dashboard. As you can see, we have received a number of questions throughout today's presentation. Please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Great. We always enjoy the question and answer, period here to make sure we address all of your your concerns, directly.

32:03 First question submitted was, please provide guidance on revenue growth expectations. As I said, earlier, it's about our guidance is $6.06 to 6,500,000 on revenues for this year. Second question. The company had previously referred on many occasions to sticky revenues. The recent loss of ITACONIX largest customer has therefore shaken investors' confidence as reflected in the share price. What assurance can the company give the investors about future growth trajectories? We believe our our revenues are sticky. We have some control over that in terms of what what terms and conditions our customers are asking for, whether or not that's attractive business to do.

32:52 At some level, we're we're you know, customers do have alter there are or there are always alternative ways and alternative formulations. When there's a certain level that we get to where we believe that, by our analysis, that we have priced the product right, and we will see whether the market can the the customer can formulate a better product out of it. That's a very fluid situation, but I can say, overall, we are gaining more customers because of the value of our polymers, and we wanna make sure that we, capture, the profitability from the value of our polymers.

33:35 Why did the board have to announce customer loss when it did instead of including it in the RNS announcing the full year results? That was a matter of timing and meeting

33:46 the AIM requirements for disclosing changes in business conditions. We adhere we wanna maintain very high transparencies and meet all of our obligations as a AIM company for disclosure to our investors on it. Next, I understand that your share price fell recently because a US customer did not wish to pay more. You're trying to improve your gross profit margins. So I can understand what has evolved being an accountant. But did you not say whether the customer would still have dealt with ex at the existing price? It's a very complex set of negotiations across a number of formulations and a number of ingredients of it.

34:36 The key one was the industry is generally aware that raw material prices have come down. You know, soda ash prices have come down. Citric acid prices have come down. Surfactant prices have come down. And the question was how much of the decrease in price were we going to pass on decrease in cost we're gonna pass on. And so it was not we weren't trying we weren't trying to increase our price. We were trying to reduce our price while maintaining attractive gross profit margin. Those are always ongoing negotiations of it, but it really is around pricing to the value. I think the second part here is that you have recently performed a share consolidation to help with dealing in The US, but this appears to have opposite effect. I would be tempted to have a look at your figures if you had been closer.

35:36 So the a question about the share consolidation that was done last year for our US shareholder base. It's important that our US shareholders, which there are a sizable number of them, have the same benefits that our UK shareholders have in terms of holding their ITACONIX shares in their brokerage account. That was not possible prior to the share consolidation and now it is. That was our first step in in in goal with the share consolidation. And now we actually do Yes. Hold we actually can hold it in our brokerage account like UK shareholders can. The next step is to expand awareness of the ITACONIX shares beyond The UK.

36:22 We do have efforts underway in that. We've contract with proactive. We do have equity research coming out that's avail that will be available outside of The UK on it. So we'll be we are expanding our sales and marketing capabilities. They are not all all in place yet, but they they will be. What methods do you use to obtain new customers? Do you have an active Salesforce, or do you rely on cold calls from your office? We have several channels that we go through. First and foremost, we have a direct Salesforce that calls on all the major detergent companies in North America and Europe. We have very good relationships with all of them, even the global brands that aren't using us yet.

37:08 And then we have partnerships in certain channels. In hairstyling, we use Neuron that takes our Amaze SP globally. Croda in home care area takes our odor neutralization globally. And then we have selective distributors in both Europe and The US that that bring us to market. So it's primarily directly to it's direct sales either ourselves through or through a distributor or a partner.

37:43 The recent Canaccord brokers report contains major CapEx of, '24 and through '26. I'll just address that is that, to date, we have, funded lab upgrades and some selective upgrades to our, our sales and marketing capabilities, which will be emerging. We are reserving, spending, for some of the development process development work 's coming that we expect to come out of the laboratory, that would turn into improvements, to our production process that would expand that would expand our production capabilities. So that's what we've reserved that in there, well within the cash that we have available and important to advancing the company further.

38:35 What do you wanna take? There are a number of posit There are a number of positions. The question is there are a number of positions currently open on BambooHR, chemical production operator, overnight chemical production, etcetera, etcetera. Are these positions still a requirement given the projection, of reductions in revenues, presumably reduction reduced production over the coming months, or do we still have something in the pipeline which will replace slash increase our production requirements going forward? So we are taking a look at our growth plan, our growth strategy coming forward. We'll assess each of these the these roles that we have. We're always on the look for a a a good fit for our growing operations. So we do have kind of just general HR efforts out there to make sure that we've got the best team in place to keep growing the business.

39:32 There's another question about the consolidation was done to facilitate increased activity in The US directed to a best interest of the company. I I think this is all about the consolidation again. Again, the first, most important part of it was that The US shareholders have the same right have the rights and benefits, to holding their shares in brokerage accounts that UK shareholders have and that the next stage for us is to expand our investor relationship, promotion, outside of The UK. ITACONIX is a project partner and a funded grant looking into new branch polymers excipients. This is a I think this is relative to a UK grant that was done, one of the universities.

40:24 We do support, university research when we can. Part of that is to make sure that, that that we, maintain, some connection with the university research that they are looking at iodine acid use. There's nothing specific coming out of any of the university research that we've done to date that we see, commercializing in the near future. When will VeloFresh SAP 80 and Velo Soft VR 300 be launched? In both situations, we are working on optimizing the products. The Velo VeloSoft VR 300, we're continuing to work on the optimization of that ingredient when it's in formulation.

41:12 We had good good optimization of it as a standalone ingredient, and then you have to go test it in a wide range of formulations of where customers might use it. And we found that we need to do some further optimization work on that. We will probably know by the end of this year, whether or not that that is the result of that is that we continue to bring it forward. There's some probability that we that it does not we can't optimize it satisfactory for commercial use. The SAP 80 is a current was the prior was a current method for producing the SAP that got us to a certain level of performance. We decided that we only had about 50% of the absorption capacity of a polyacrylate, and we were at a price premium.

42:04 What we believe is that we can get to equal absorption capacity per gram as a polyacrylate. And, again, it'll be at a price premium to the polyacrylate, but, not as high. So the combination of lack of of lower absorption and high cost, although there would have been we think there would be some market for it, we did not wanna go out with an inferior product when we think we have a superior one available. It does it will take some process development work, to be able to produce what we, one that matches the performance. We do have prototypes of that, working in our lab and in testing, but it's gonna take some process improvements to do that. We expect that that'll be there's a number of steps to get us there. We expect that that progress to be coming in twenty late twenty twenty four in terms of the technical development of it, and steps towards commercialization more to come in 2025.

43:11 I think there's one last bit of that question. What is happening with sustainable fashion? First order in December 2021. We're still seeing a lot of activity in sustainable fashion. We've successfully had some products made with the ITACONIX polymers in the leather tanning. So we've got some ITACONIX shoes. So, hopefully, to be in the fall fashion season of 2024. That's the joke, son. The no. We are we're making excellent progress on the leather side right now. We think it's gonna one of our more exciting areas in this year and and into '20 this year, 2025, and 2026, some major progress in that area. Major players, become apparent from research that there are many cosmetic products available to purchase online are now being produced by a number of bigger players. Is this an area, you were looking to increase your presence?

44:18 Unilever, We are, this is work that is being done, excellent work, by Neurion. They've been a great partner for us. After that lull in the pandemic, we see nice increase in activity there. It's great to see more products coming out and to see more activity coming. You talked of a newly formulated product for the Croda collaboration, yet there is nothing on their website. We are we do have a new form of a dry form of our zinc polyiodic conate that we have for ourselves and are in this ongoing discussions with Croda to make available to them. With such a large loss of business with your major merchandise, how do you expect them to replace your polymer?

45:07 We'll be watching closely to see how they do it. There is ways to do it with using petroleum based ingredients that we think that that there's ways there are ways to do it. We do not know exactly how how they plan to do it, and whether they're gonna be able to do it across all of the brands that they participate in. But, we will be watching intently on it. What chance of the SAP ever becoming a success that has now been pushed back? I think I covered that pretty closely. That is really the performance per gram absorption per gram that we wanted to advance. It's a there it's a fairly sophisticated polymer to make. It's not as straightforward as our DSP two k or our TSI three twenty two. It takes some quite a bit of optimization to have a competitive one. Particularly, it's like our first generation one, and we're all competing against tenth generation polyacrylates that have been optimized for the last thirty years.

46:16 With the expansion of the ingredient portfolio, how do you prioritize new development initiatives here? We go through it as a I think our CTO, doctor Yvonne Durant, brings forward ideas for what we have for novel chemistries of it. Our sales and marketing department, primarily myself and other in Jim Gordon in Europe, bring forward what customer needs are, and we line those up to see, what we think the revenue opportunities are, how quickly we can get into it, and, what the development time will be. One thing that that having some cash allows us to whereas before, when we're cash constrained, we had to work on very short term options. So the prioritization was, like, how fast can we get it out in the market and get revenues of it? Almost even if some of them were relatively smaller opportunities, the cash that we have available does allow us some flexibility to pursue larger opportunities that that might take longer to develop. I would like to highlight this is that what you see here, we have, through our bio Asterix, we have developed a a prototype for artistic paint. We've actually had our first professional art artist artistic piece done using paints that were actually formulated here in our lab. They are not

47:47 optimized by any standpoint, but it's a pretty pretty nice painting on it, though, too. So this is an area, again, where the funds that we have available are gonna give us an opportunity to move forward in an area that we weren't able to do before. James s asks, what is the cash runway? We believe with the fundraise that happened in February 2023, we're well positioned for any cash needs that we'll have. We do expect that with the loss of our a major merchandising customer that our cash runway or our projections have moved kind of one year to the right. So we have enough cash to kind of deal with that, but our cash runway is more than sufficient to get to breakeven EBITDA.

48:37 Mister Shaw aired at the start of his talk, he said there was a large increase in turnover in '23 over '23. I presume he meant 2022. One cup of coffee short this morning of on that one. Yes. It was '20 increased in 2023 over 2022. After the recent loss of a major existing customer in North America, how long is your cash runway expected to last? We have, plenty of cash. We don't see any, any scenario where we don't have plenty of cash to to make it through for a number of years and meet our objectives for growth. Can we expect to see a concentration of revenues move away from current levels as clients increase? Yes.

49:27 We it is one of our goals. If you were to look at us a 100 when we look strategically to be a $100,000,000 company, we have ideas of what we'd like in terms of diversity, of concentration of customers, and of applications of it. We think that's important to have leverage on your pricing to any one customer and let in in exposure in any particular application. It is not healthy to have a high concentration where a customer may have may have undue negotiating pressure on you in terms of what your overall revenues are. What are the targeted EBITDA breakeven and positive cash flow from operations?

50:20 So we believe I think we I'm sorry. I think we missed it. I missed it. Can you give us some idea of the size of other customers with whom your margins may not be at levels acceptable to you? They're all I I think the early on in the leather area, we are giving some pretty aggressive pricing in that area, so that the mark early on in an application area like that, you need to keep the threshold pretty low for trial. When we look at what the opportunity is, to get people used to using your product and seeing the benefits of the product out of the market. So sometimes you have to to get it to get the the use of your product out in the market so they can see the value of it. You can keep some relatively aggressive pricing, which I think there is in leather.

51:10 The rest of it is all really volume commitment volume related in terms of getting the commitments that we need so that we can really optimize the supply chain into a particular customer for a particular volume. Sorry about that. So go. So we kinda touched on already EBITDA breakeven. It's kind of slid twelve months to the the right. So we expect probably not this year, but 2025 when we would be EBITDA. Our target is to be EBITDA breakeven. And then subsequently, positive cash flow from operations would be in the coming year after that. If ITACONIX products offer a cost advantage, then why don't the majors of P and G look to use in their products? Well, they do look to use that.

52:03 They they do look at it. We have very good relations with both companies. The main barrier we have is in Europe is that they continue to use phosphonates. Phosphonates are very inexpensive products for scale inhibition. And but they are in the realm of you know, they aren't a phosphate, but they're kinda in the realm of phosphates. So we think as, as they look at taking the phosphonates out, we think we are an excellent alternative to it. But every brand is making a choice. Some of our customers in Europe have already taken the phosphonates out, and we expect over time that as they come out and you see those coming off of labels, that we'll continue to have growth around that.

52:57 While so while REC and Unilever already have alternative formulations that can deliver the same quality functionality as achievable through that country, but are those alternative formulation equally cost effective as well? They are they are cost effective on it, particularly when they're when they're bundled and bundled pricing into the large companies that the Unilevers, they'll you'll get very aggressive pricing from the larger from the very large specialty chemical companies. That's why we find some of the smaller accounts better for us on it because they just get they just get better pricing of it. I think they're we are gonna continue to be able to put pressure on those. We have very good discussions and engage with all of them in discussions around around it. One is it is we we as I mentioned earlier, we are continuing to work on the on the environmental profile and substantiating the environmental profile of our polymers relative to other ones. We continue to work on areas like what the environmental fate is for our product when it gets out into the marketplace.

54:13 We're making technical presentations to the industry with a very pretty significant investment we put into through our laboratories of substantiating the sustainability credentials of our polymers. And those are those are important to bring to the largest companies. Reduction in ocean shipping costs help the 2023 growth. Is there a risk that the recent rise in prices on the back of might hurt are are routes unaffected by the switch? It currently has not affected the pricing. We continue to monitor it with our vendors. They constantly keep us informed of our international freight costs. So as of right now, there's not been an impact on our current raw material pricings.

55:06 Our our shipping comes from Asia directly across to the West Coast Of The US. So the none of it goes through the Suez Canal or or around, those shipping channels. Clearly, the cleaning side of the business is well advanced compared to the beauty and hygiene. What have you learned from the cleaning market that you're putting into practice in the other two markets as you evolve your business? I think what we've found is we wanna be closer to we wanna be as close to the customer as possible. What we found in cleaning, and this happened a little bit to us with with our large account, our products started passing through too many people's hands.

55:53 You know? And what for everybody that puts their hand on your product, they like to add, you know, their their margin on top of it. So you start adding, you know, 10%, 15% on top of it at the blender, and then people add it on. So that all takes away from the actual value that we can charge for our for that. So we are learning to be closer to the form closer to the customer and the actual formulations that are being done, to make sure that we can have that value. And I think you'll see some initiatives, later on this year that will demonstrate that. Thank you for addressing directly and openly the problem with North American dishwashing detergent customer. Can you explain where that customer sits within the customer concentration diagram?

56:42 Are they one of the ones sitting behind the contract manufacturer, or are they one of the other direct customers? So, yes, they are sitting behind one of the contract manufacturers. They use multiple sites within our customer concentration to produce their pods. So they produce pods through customer one and customer two. So it they did not they're not a 100% of those customers, but they do work with two of our customers to produce pods. So it is not a direct relationship. It is through the contract manufacturers, our customers. I see that you don't capitalize much, almost anything, in terms of development costs for the products. Please, could you talk about why that is and whether your auditors might pressure you to capitalize certain expenses in future?

57:32 We have discussed this with our auditors. We do continue to look at our research and development costs. The rules and guidance around that is pretty specific. We have to be doing certain activities that can be capitalized. We've not determined that those costs that we are currently incurring are capitalized while we expense them in the current year. Do we understand that the revenue loss is a strategic decision based on pricing negotiations? Yes. It is. These pricing negotiations go back well over a year and a half of discussions when discussions began in terms of where to price it, particularly as raw, but as some of the other ingredient costs started coming down, the surfactants, the soda ash, citric acid.

58:23 So they've been on ongoing negotiations. We had it was actually extended into this year of what our 2024 pricing was gonna be. We had not come to terms, for what the 2024 pricing was gonna be, and it really got to the point where we did not see the the opportunity to we saw many opportunities to reduce the overall cost of the formulation. And what got down to what part of it we were willing to do, by the decrease in our in ours, we just we we came to a point where we really needed to hold the line, on our pricing of it. They are, continuing negotiations in it, and we we shall see. Are you aware of any new regulations that would be favorable to ITACONIX products?

59:08 I mentioned the phosphonates. I don't I don't think there'll be a regulation necessary on phosphonates. I think there may be more, more pressure, consumer pressure on the phosphonates, but that remains to be seen. Phosphonates are very effective product, in formulations of it, but that remains to be seen. What are your timelines to become a a $100,000,000 company? We don't specifically get one. I think that our next goal is to get is to get to profitability. That really set the next stage of development for us is to get to profitability with a broad range of of applications and customers and that we have progress made in each one of the areas that we need to make to be a $100,000,000 company.

59:58 So that would be in cleaning and in hygiene, and you get off into some paints and coatings areas like we've talked about here. We will I can't find an up to date cost company investor presentation on your website. We will upload it following kind of this presentation, so you should have access to that. How do I get access to your projected financial forecast of a non premium account holder with Canaccord? We'll have to get back on that. Laura and I are not I I think there are ways to access research through some portals, but we can we'll have to come back on that one.

1:00:44 We need to be issuing an RNS for any kind of new first diversification order wins. We will be updating the market on progress that we're making across the board on it. We expect to have new supply agreements. We expect to have up keep the market updated in terms of any change in our business conditions, positive or negative, but we do expect, to be able to bring, news to the market in the coming months. And those are our questions. Those are our answers to your questions. John, Laura, thank you for answering all those questions you can from investors. And, of course, the company can review all questions submitted today, and we'll publish our responses on the investor meet company platform.

1:01:34 Just before redirecting investors to provide you with their feedback, we're not which I know is particularly important to the company, John, could I please just ask you for a few closing comments? We're just you know, it it was a great 2023 in many respects to have the resources that we need to be create a great company and expand to meet our ambitions of being a $100,000,000 company. It is difficult, to start the year out with the, with how we have in the first quarter of having to adjust our revenue expectations. That does not change at all, our, our ambitions and potential to be what we, to to be what we want to be as a company.

1:02:22 And it it really, shows you the capabilities and the efforts we're going to make that when we get there, there's a very healthy set of revenues that we have at the margins that we know we deserve for our ingredients of it. I think that's our obligation to to all the work that we've put in. It's our obligation to shareholders that we get the value that we know our ingredients bring to it and to find more and more opportunities to do it, which I think we are. And we look forward to reporting, on continued progress through the rest of 2024. John Thank you for your time. Really appreciate it. John, Laura, thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations?

1:03:13 This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of ITACONIX PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all. Thank you.